How Banking Has Changed Over The Years

Banking has changed in many ways over the years. Banks today offer a wider range of services, delivering them faster and more efficiently. The central function remains the same. Banks put a community's funds (deposits and investments) to work by lending to people to buy homes or cars, to start and expand businesses, to help aid their children through college and many other purposes. Banks are vital to our nation's economy. In most states during the early federal union, bank organizers needed special permission from the state government to open and operate. A central bank was founded in 1791 by the nation's first Secretary of the Treasury, Alexander Hamilton. It expired in 1811. A second Bank of the United States was created in 1816 and operated until 1832. In those days, city bankers tended to be extremely cautious about to whom they lent and for how long. To make sure they had enough cash available, bankers generally made short-term loans of only thirty to sixty days. An example of this is manufacturers and shopkeepers would use these funds

This supervision often proved inadequate. In those days banks made loans by issuing their own currency. These bank notes were supposed to be convertible, on demand, to cash—hat is, to gold or silver. It was the job of the bank examiner to visit the bank and certify that it had enough cash on hand to redeem its outstanding currency. Because this was not always done, many bank note holders found themselves stuck with worthless paper. It was sometimes difficult or impossible to detect which notes were sound and which were not, because of their staggering variety. By 1860 more than 10,000 different bank notes circulated throughout the country. Commerce suffered as a result. Counterfeiting was epidemic. Hundreds of banks failed. Throughout the country there was a demand for a set national